Trading? Have Fun Staying Poor! Here's How to Get Rich Slowly Instead

At first, there was Bitcoin. Then came Monero and Ethereum. They were called cryptocurrencies and attracted a lot of Forex traders. Bitcoin minted new millionaires and billionaires and trading apps and tutorials sprung up everywhere.

And it started looking like all anyone would have to do to become rich is to start crypto day trading.

Turns out, that’s a smokescreen. According to the trading platforms themselves, 70 to 100% of retail traders lose money, and 75% quit after two years. In crypto and elsewhere.

So how are people making money? In crypto, as in the traditional markets: slowly, by investing, not trading.

“Crypto”, or Web 3, just like web 1 and 2 before it, is reinventing about every type of business that exists, including their back office.

And it is creating a once-in-a-lifetime wealth-building opportunity. Indeed, Crypto is the first time investing in high-growth tech startups is this approachable for retail investors: you can invest in small amounts, and the markets are liquid so you don’t have to be locked in for 10 years.

But most people should approach it as “Venture Capitalists” and not “Traders”. That is as long-term bets with a carefully managed diversified portfolio.

Venturing with OSOM

At OSOM, we are on a mission to take the stress out of money and to bridge the gap between Crypto & Fiat. We recognized this opportunity early on but when we started there weren’t many other options to invest in crypto other than connecting to an exchange. And admittedly, there still aren’t.

We understand that most people aren’t traders and don’t understand the trading interfaces. And we know, from years of academic research, that most people shouldn’t trade but invest. It is nearly impossible to accurately time the market for professionals who have teams of PhDs with supercomputers at their disposal, so it stands to reason that you on your phone during your toilet break don’t stand much of a chance either.

So we built a way for everyone to have an algorithmically managed, diversified, long-term-focused portfolio of Crypto “companies”.

Rule-based long-term investing FTW

The solution is to find recipes that work and apply them consistently over time, eliminating the (fallible) human aspect to the extent possible. The most basic - and best known - way to do that is indexing.

Indexing is easy, rule-based and it sidesteps the flawed decision-making process of humans by eliminating it altogether.

But for an asset class as young as crypto assets where new categories appear every year, indexing is too rigid.

But if we know that the drivers of performance is simply consistency and a defined set of qualitative rules that minimize human influence, then we can improve upon it massively, and design rules that are best adapted to the market we want to target.

This is what we have done with the OSOM Crypto Autopilot, and based on 2 years of being in the market we can say it unequivocally: we beat the market. We beat the market in terms of performance and we beat the market in terms of risk-adjusted-performance.

As of Dec 1, 2021, over the past 2 years, we have generated a 1398.73% performance in Euros, and 125.01% in BTC. That’s 246.03% and 45.04% annualized, respectively.

Find the live performance at bit.ly/OSOMPerf and deeper analysis at bit.ly/OSOMPerfBenchmark.

What are the rules that the OSOM Crypto Autopilot uses?

We first define a “universe” of good assets the Artificial Intelligence can choose from:

• High market cap: a relative sign of quality
• High liquidity: because we want to be able to sell your position if we need to, and illiquid coins would see too much slippage
• No privacy coins (Dash, Monero): because the regulators really don't like them and there is a serious risk they will be increasingly delisted from exchanges
• No mem coins (Dogecoin): they are undoubtedly fun, but we want to invest in projects with a real future
• Mostly no forks (Bitcoin Cash, Ethereum Classic): most of the forks don't appear to really have a future and don't have a lot of developer backing, so they don't make for very good investments
• No stablecoins (Tether, USDC, EUT, EURS): the idea is to help you access the value of true crypto projects with groundbreaking possibilities. Not to have you hold digital cash
• No commodity-backed coins: the idea is to help you access the value of true crypto projects with groundbreaking possibilities. Not to have you hold gold or silver
• No derivatives or synthetic products: we like the simplicity - and relative safety - of investing directly in the real thing. No more than 40% in any one asset.

And the algorithm then decides what it will take positions in to optimize the portfolio. It looks at several months of past price data to inform its decisions. It takes into account historical rise and falls, but over several months, not over days. It doesn't have "momentum" detectors (and when we tried adding some it generally performed worse).

Its objective is to build “stable growth” over the medium to long term (2.5-5 years). Stable here means “without drawdowns” (a drawdown is a top-to-bottom decline over a specific period). It optimises for a 4th generation risk measure - iVaR - which can roughly be described as the time it takes to recover any losses. You might also have seen a simplified version of it be called “the Ulcer Index”.

You might be wondering how focusing on minimizing the risks allows us to beat the market. Funnily enough, optimizing to reduce risks actually also helps improve the returns. We don’t want to bore everyone with the details and the math, but if you are interested, you’ll find more academic information here and in the product sheet of our partners.

Historically, the chances of gains improve over time

This is what getting rich slowly looks like. Over two days even an artificial intelligence has almost a 50/50 chance of winning. But over 600 days, the OSOM Crypto Autopilot has yet to show a loss.

What to take away from this?

One, most day traders found a very good “get-poor-quick” scheme. Statistically, you are more likely to run into the same pattern than do anything else by joining their ranks.

Two, wannabe investors need to pay very close attention to not letting their emotions get in the way of their returns, as a poorly timed entry/exit can be costly. Humans suck at timing. Even professional fund managers perform inconsistently. The best is not to try.

Three, “make a plan, set it, and forget it” is the only known, historically reliable, wealth-building method. Working with robots is a better way to achieve this.